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Can the US Healthcare Affordable Care Act (ACA) be profitable for Insurers

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The Patient Protection and Affordable Care Act(ACA) has made many insurers rethink their path to a profitable and sustainable future. The ACA poses numerous hurdles to overcome including maintaining an MLR of 80-85% or more, writing profitable yet affordable products for the individual marketplace, and overcoming a surge of new competition. However, despite these risks, the ACA also provides a wealth of opportunities including tapping into a pool of 41 million uninsured Americans.

In order to gauge the current state of the U.S. health insurance industry and its future prospects with regards to the ACA, WNS DecisionPoint(TM) carried out a detailed study of 20 health insurance companies in the U.S., supplemented by expert interviews. This study aimed to gather insights on the financial performance and current maturity of health insurance companies across the entire payor value chain. Based on this study, several key strategies emerged for insurers to maintain and increase profitability in this new landscape:
- Educate and simplify insurance for the uninsured and nurture long-time customers to encourage loyalty
- Determine lifestyle and disease management program mix based on local customer profiling
- Track performance of physicians/doctors, compare medical outcomes and best practices to not only improve care management but encourage performance based risk sharing
- Streamline workflows and processes with automation and invest in analytics solutions to improve operating efficiency

To find out more about the new opportunities the Affordable Care Act opens up for insurers and how to leverage them, browse our slideshare deck or read the full report at:

http://www.wnsdecisionpoint.com/our-insights/reports/detail?48=can-the-u.s.-affordable-care-act-be-more-than-a-burden

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Can the US Healthcare Affordable Care Act (ACA) be profitable for Insurers

  1. 1. wnsdecisionpoint.com Can the U.S. Affordable Care Act be more than a Burden? How can ACA be Financially Profitable and Sustainable for Insurers?
  2. 2. 1© Copyright 2013 WNS (Holdings) Ltd. All rights reserved1 Wnsdecisionpoint.com Trends driving the U.S. health insurance industry landscape guided by shift in customer behavior  Medical care is becoming more preventive in nature – General rise in health consciousness – High costs associated with medical treatment/care driving precautionary wellness  Health insurance is slowly evolving into a B2C industry – Focus on selling health insurance directly to individuals rather than reaching out to companies  Emphasis on predicting future health risks accurately is on the rise – Enhance profitability by: □ identifying profitable target markets and groups □ writing profitable products 1 wnsdecisionpoint.com
  3. 3. 2© Copyright 2013 WNS (Holdings) Ltd. All rights reserved2 Wnsdecisionpoint.com Healthcare Ecosystem post Affordable Care Act Risk-Mitigation-Opportunity-Implication Matrix – A Snapshot Affordable Care Act adds to the difficulty by propounding a difficult path laden with risk of declining margins for health insurers ACA imposes numerous regulatory mandates for the U.S. health insurance industry WNS DecisionPointTM analyzed several opportunities and risks arising due to ACA and suggests mitigation measures and implications to deal with the revised health insurance landscape The Patient Protection and Affordable Care Act, generally called the Affordable Care Act (ACA), was enacted in March 2010 since the U.S. had to:  Reduce overall healthcare cost  Expand the insured population pool  Improve advanced care needs  Reduce bad debts and revive antiquated healthcare ecosystem Risk MLR should be 80%-85%, else shortfalls have to be refunded to customers Premiums should be gender/ pre-existing medical conditions agnostic, making writing affordable premiums difficult Mitigation measures Provide preventive care to people to decrease % of sick and lower claims Understand current and future health trends to minimize impact arising from related risks Opportunities Insurers can tap ~41 million uninsured Americans Implication Design competitive and profitable products post comprehensive assessment of underlying risks in specific markets For a complete view of the Risk-Mitigation-Opportunity-Implication Matrix, please download the full report Clearing House $ Insurance cover Insurance cover $ Tie-ups $ Approved claims Claims Hospitals Individual care givers Pathology Lab and Diagnostic Centers ACOs Treatment / Care Medical device $ Medicinal drugs $ Medical Device Manufacturers Pharmaceuticals Companies Change brought in post Obamacare Act Uninsured Population Insured Population Insurance Market place  Private Insurer  State  Federal Healthcare Provider 2 wnsdecisionpoint.com
  4. 4. 3© Copyright 2013 WNS (Holdings) Ltd. All rights reserved3 Wnsdecisionpoint.com RoE of top 10 U.S. health insurers deteriorated in 2015 compared to 2009 due to operating inefficiency Decision Areas Mid-size* Large* Performance Product Development  Limited product innovation  Offer innovative products and services like telemedicine  Conducts interviews with individuals, doctors and hospitals to comprehend product needs  Limited use of sophisticated analytics to analyze which markets to serve, what kind of products to develop  Understands individual customer needs by leveraging analytics on claims data  Use the above insights on claims data to decide markets entry and targeting strategies Pricing  Use basic actuarial forecasting  Lower premium prices as administrative expenses are low  Predictive modeling using statistics from Federal Government, hospitals and doctors etc -40 -20 0 20 40 60 UnitedHealth Group Incorporated Anthem, Inc. Aetna Inc. Humana Inc. Cigna Corp. Centene Corp. WellCare Health Plans, Inc. Molina Healthcare, Inc. Triple-S Management Corporation Universal American Corp Growth in A&H Premiums Earned (%) 2011 2012 2013 2014 2015 0 25000 50000 Anthem, Inc. Aetna Inc. Humana Inc. Centene Corp. WellCare Health Plans, Inc. Molina Healthcare, Inc. Total Medical Membership (thousands) 2010 2011 2012 2013 2014 2015 *U.S. health insurers with latest annual revenues greater than $1 billion were classified as ”large” companies, while those with revenues less than $1 billion were classified as “mid-size” ones # Payor value chain includes product development and pricing, sales and marketing, care management programs, strategic alliances and risk management For a complete view of the U.S. health insurers’ maturity state across the payor value chain and financial performance, please download the full report WNS DecisionPointTM conducted a detailed study of 20 health insurance companies in the U.S., supplemented by expert interviews to:  Gather insights on their financial performance  Estimate the maturity state of health insurance companies belonging to two tiers* and across the payor value chain#
  5. 5. 4© Copyright 2013 WNS (Holdings) Ltd. All rights reserved4 Wnsdecisionpoint.com 4 The current financial scenario demands heath insurers to relook at their business models For a detailed view of the recommendations, please download the full report However, for the U.S. health insurers it is crucial to outgrow their traditional roles, become ineludible partners in medical care by focusing on ways to improve care management and remain profitable The question but, is HOW?-0.05 -0.04 -0.03 -0.02 -0.01 0.00 2009 2015 Average Underwriting Profit Top 10 U.S. health insurers experienced diminished operating efficiency and decline in underwriting profits in 2015 compared to 2009 Attainment of cost efficiency is imperative in such a scenario 4 wnsdecisionpoint.com
  6. 6. 5© Copyright 2013 WNS (Holdings) Ltd. All rights reserved5 Wnsdecisionpoint.com© Copyright 2016 WNS (Holdings) Ltd. All rights reserved A credible insights hub for companies looking to transform their strategies and operations by aligning with todays realities and tomorrow’s disruptions. Email: perspectives@wnsdecisionpoint.com Website: wnsdecisionpoint.com @WNSDecisionPt WNS DecisionPoint WNS DecisionPoint

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